Fixed Income HW due 6/29/19 Assume today is June 19, 2019 and that all bonds pay...

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Fixed Income HW due 6/29/19
Assume today is June 19, 2019 and that all bonds pay interestannually with a face value of $1,000. YTM = Current yield + CapitalGains yield; CY = Annual Interest/Current Price
GE is A rated; AA Treasuries yield 3-year is 1.90%, 10-year2.10%
5 Years ago GE issued 6% coupon paying bonds with a face valueset to mature on June 19, 2029. Growth concerns have forcedmonetary authorities throughout the world to lower interest ratesduring the past several years and as such, the price of these GEbonds has risen to 1175.00
Calculate your annualized return if you assume that you buy thebonds today and they are not called, and you reinvest the interestin years 1-5 at 3% and in year 6-10 at 5%.
Explain why your answer differs fromthe YTM that you calculated in question 1.
Calculate the Macaulay Duration and Modified Duration for thesebonds based on today’s price. Given your calculations estimate whatwould happen to the price of the bonds if interest rates were torise 1% from current (today’s levels). Assume the change isimmediate and dissect the change in price due to duration andcompare it to the actual calculated change in price.

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Fixed Income HW due 6/29/19Assume today is June 19, 2019 and that all bonds pay interestannually with a face value of $1,000. YTM = Current yield + CapitalGains yield; CY = Annual Interest/Current PriceGE is A rated; AA Treasuries yield 3-year is 1.90%, 10-year2.10%5 Years ago GE issued 6% coupon paying bonds with a face valueset to mature on June 19, 2029. Growth concerns have forcedmonetary authorities throughout the world to lower interest ratesduring the past several years and as such, the price of these GEbonds has risen to 1175.00Calculate your annualized return if you assume that you buy thebonds today and they are not called, and you reinvest the interestin years 1-5 at 3% and in year 6-10 at 5%.Explain why your answer differs fromthe YTM that you calculated in question 1.Calculate the Macaulay Duration and Modified Duration for thesebonds based on today’s price. Given your calculations estimate whatwould happen to the price of the bonds if interest rates were torise 1% from current (today’s levels). Assume the change isimmediate and dissect the change in price due to duration andcompare it to the actual calculated change in price.